Parliamentary Budget Officer’s report highlights financial risks for Canadians after Trans Mountain purchase

For Immediate Release – January 31, 2019

Parliamentary Budget Officer’s report highlights financial risks for Canadians after Trans Mountain purchase

VANCOUVER, BC, Musqueam, Squamish and Tsleil-Waututh Territories – A new report released by Canada’s Parliamentary Budget Officer challenges proponents’ claims about the financial benefits of the Trans Mountain pipeline, says West Coast Environmental Law.

The report emphasizes that delays in construction could significantly reduce the value of Trans Mountain, and shows that claims about the project’s impact on jobs and oil prices have been greatly exaggerated. And lawyers say the true costs of the project may be even greater, as the report is based on outdated and incomplete information, highlighting a lack of transparency regarding the economics of the project.

“We already knew the federal government’s buyout of Trans Mountain was a bad deal, not only for the environment but for taxpayers,” said Eugene Kung, Staff Lawyer. “There is still a big transparency problem with this pipeline because of how the federal government structured the purchase. The cost of construction continues to be a mystery. Canadians deserve to know how much they are on the hook for.”

In his 23-page report, Parliamentary Budget Officer Yves Giroux confirms that Ottawa’s $4.4 billion payment was likely higher than the evaluated cost of the pipeline. Giroux also found that delays in construction of the Trans Mountain Expansion Project would further reduce the value of the pipeline.

Unfortunately, the Department of Finance did not provide the PBO with all of the relevant information, citing confidentiality. The PBO therefore had to rely on publicly available information from Kinder Morgan, which does not consider the impact of the August 2018 Federal Court of Appeal decision that quashed the approvals and cancelled the certificates and permits needed for construction. As a result, the report relied on out of date information that paints an incomplete picture about the risks facing Canadian taxpayers.

“When the Federal Court of Appeal quashed the approvals, the value of the expansion project decreased significantly. In other words, that $4.4 billion looks even worse today than it did when the purchase was announced,” said Kung.

In addition, recently uncovered documents revealed that Canada sought advice and analysis from the same industry insiders (Muse Stancil) who previously worked with Kinder Morgan to prepare evidence justifying the economics of the project for the NEB. Redacted versions of those documents were reviewed by the PBO. Unfortunately, they were based on overly optimistic and out-of-date forecasts by industry lobby group CAPP (Canadian Association of Petroleum Producers) that are not aligned with reality.

“Kinder Morgan’s out-of-date estimates paint a rosy financial picture that is not grounded in reality. Construction is already delayed due to the Federal Court of Appeal decision, and could be further delayed,” said Kung. “The ongoing NEB process was given a very short timeline, and it repeated many of the same mistakes as the first time. That will likely result in further legal challenges, resulting in further delay.”

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For more information, please contact:

Eugene Kung | Staff Lawyer, West Coast Environmental Law
604-601-2514, ekung@wcel.org